INB 300 Chapter 10

Which of the following is true of a multinational enterprise (MNE)?

A firm that enters foreign market via foreign direct investment (FDI)

_____ is a type of wholly owned subsidiary.

A greenfield project

_____ is defined as a project in which clients pay contractors to design and construct new facilities and train personnel.

A turnkey project

A software company in China has decided to become a multinational enterprise (MNE). The company desires to completely own its subsidiary and requires a fast entry mode. In addition, the company wants to enter into business immediately without requiring to add a new capacity. In this scenario, which of the following modes of entry will be most appropriate for the company?

Acquisition

_____ is the location-specific advantage that arises from the clustering of economic activities in certain locations.

Agglomeration

Which of the following modes of entry call for the establishment of independent organizations overseas?

An equity mode

Which of the following is a strategy to overcome cultural distance while engaging in international business?

Choosing countries with colony-colonizer links

Palova Skin care, a famous cosmetic brand, is successfully engaging in international business with several countries. Contrary to the successes in foreign market, the recent attempts to expand its business in its neighboring country, Arkadas, has been unsuccessful, owing to its strict rules for women and perception of beauty. In this scenario, which of the following is most likely the reason for Palova's failure in Arkadas?

Cultural distance

Which of the following is a formal barrier to trade when foreign firms enter new markets?

Currency risk

Which of the following is an informal barrier to trade when foreign firms enter new markets?

Currency risk

Which of the following is a difference between first movers and late movers?

First movers face greater technological and market uncertainties, whereas late movers take advantage of the solutions of the first movers.

Flarring Corp. is a well-known company that manufactures spare parts for automobiles. The company, based in Boston, expanded by entering the market of Nerodo. Even after 12 years of marketing in Nerodo, the company is on the verge of failure. In this case, which of the following factors could lead to the failure of Flarring Corp. in Nerodo?

Formal rules that are favorable to local firms

Which of the following statements is true of scale of entry?

Large-scale entries demonstrate a strategic commitment to certain markets.

Dubai attracts numerous foreign entrants to engage in international business. It is an ideal stopping point for air traffic between Europe and Asia, and between Africa and Asia. Which of the following advantages has Dubai honed to attract foreign business?

Location-specific advantage

Ink Struck Inc., a publishing company, wants to expand its market worldwide. In this case, which of the following will be a challenge faced by Ink Struck Inc. in host countries?

Overcoming liability of foreignness due to its nonnative status

From a resource-based view, which of the following strategies can lead to successful penetration of foreign markets?

Possessing enormous organizational capabilities

If a firm decides to engage in crude oil and petroleum business abroad, which of the following countries will provide location-specific advantage to the firm?

Russia

Which of the following statements is true of research and development (R&D) contracts?

They are difficult to negotiate and enforce.

Which of the following is true of location-specific advantages?

They decline when companies overcrowd or when taxes are raised.

Which of the following statements is true of late movers?

They may be able to free ride on the huge pioneering investments of first movers.

Which of the following statements is true of greenfield operations?

They suffer from a slow entry speed of at least one to several years.

_____ is a non-equity mode of entry into a foreign market.

Turnkey project

Laelle Corp., a popular cosmetic brand in France, has decided to expand its business to Australia. The company enters into an agreement with a local firm in Australia by which the two companies share 50 percent equity. This mode of entry is an example of _____.

a joint venture

Pro-creations Corp., a tool manufacturing company, has decided to expand its business internationally. Consequently, the company has paid a contractor to construct a manufacturing facility and an office. When the project is complete and ready for operation, the contractor will hand over the facility to Pro-creations Corp. to pursue its business. This mode of entry into international market is an example of _____.

a turnkey project

A greenfield operation refers to:

building new factories and offices from scratch.

In the context of modes of entry, _____ refers to efforts among a number of firms to jointly market their products and services.

co-marketing

Prime Vera is a company that sells electrical baking appliances in over 12 countries. It collaborates with Silibakes Inc. and sells silicon baking cups with its new range of electric oven. This mode of entry is an example of _____.

co-marketing

A joint venture is defined as a subsidiary located in a foreign country that is entirely owned by the parent multinational.

false

According to the stage model, firms will enter culturally different countries during their first stage of internationalization and will then gain more confidence to enter culturally similar countries in later stages.

false

In the context of entering into foreign business, firms with a strategic goal to seek market should select economies of scale and abundance of low-cost factors.

false

Last movers will build precious relationships with key stakeholders such as customers and governments.

false

The pioneering status of first movers gives them the guarantee of success.

false

Being a first mover in a market is advantageous for a firm because:

it may gain advantage through proprietary technology.

In the context of entry timing, _____ is defined as the benefit that accrues to firms that are late entrants in the market and that early entrants do not enjoy.

late-mover advantage first-mover advantage

Rues and West Bros., a technological giant, is a company motivated with the drive to find new and affordable technologies. It is selecting a location so that it can operate with its motive, as well as enjoy the benefits of the location. In this scenario, Rues and West Bros. should select locations:

that possess abundance of innovative individuals, firms, and universities.

A liability of foreignness refers to the inherent disadvantage that foreign firms experience in host countries because of their nonnative status.

true

From a resource-based view, managers need to match entries with strategic goals to be successful in foreign markets.

true

To be successful in internationalization, managers need to understand the rules of the game, both formal and informal, governing competition in foreign markets.

true

To overcome cultural and institutional differences, it is more important to consider strategic goals such as market and efficiency rather than culture and institutions.

true

When foreign firms enter new markets, they are often discriminated against the local firms.

true